Customs, Excise and Gold Tribunal - Bangalore
Raja Rajeshwari Intl. Polymers (P) Ltd. vs C.C.E. on 20 January, 2005
Equivalent citations: 2005(180)ELT448(TRI-BANG), 2006[3]S.T.R.561
ORDER T.K. Jayaraman, Member (T)
1. Revenue proceeded against the appellant on the ground that they had failed to declare the whole value of service rendered to their clients resulting in short payment of Service Tax. The appellants are providing taxable service under the category "Clearing and Forwarding Agents" as defined in the Finance Act, 1994. The appellants provide the above services to M/s. India Petrochemicals Corporation Ltd., Vadodara (hereinafter referred to as M/s. IPCL). In the capacity of the C&F Agents, they receive goods from M/s. IPCL for forwarding the same to the buyers. They receive service charges/commission for Godown sales and PDA sales. PDA sale means a transaction where customer books directly from M/s. IPCL for the benefit of free delivery of goods. On the PDA sales, the appellant receive charges of Rs. 250 per MT. On these charges, no Service Tax has been paid. The appellants submitted that these charges are on account of their acting as 'Del Credere Agent for M/s. IPCL. It was clarified that in respect of PDA sales, they ensure, as per their agreement with M/s. IPCL, that the payments are collected in time from their customers and in case of any delayed payments, reimburse the same to M/s. IPCL and thereafter recover the outstanding amount from the customer in consultation with the company. According to the appellant, the amount paid by M/s. IPCL to them on account of their acting as Del Credere Agency is not in the nature of commission for C&F Agency, as they are not handling the goods relating to the transaction either directly or indirectly. The adjudicating authority, apart from confirming the alleged short levy, imposed equal penalty under Section 78 of the Finance Act, 1994. Penalties were imposed under Sections 75A and 76 of the Act. Interest was also demanded under Section 75. The appellants were not successful before the Commissioner (Appeals). They have come before this Tribunal strongly challenging the OIA.
2. Shri K.S. Ravi Shankar, learned Advocate appeared for the appellant and Shri R.V. Ramakrishnappa, learned JDR appeared for Revenue.
3. The thrust of the learned Advocate's submission is that the Revenue is not justified in levying Service Tax on an activity, which is not related to C&F agency work as per the Finance Act, 1994. It was clarified that the appellants indemnify their Principal in the event of loss to them as a result of credit extended to third party. He brought to our attention the definitions of DEL CREDERE from standard authors.
"Del credere : An agreement by which a factor, when he sells goods on credit, for an additional commission (called a "del credere commission"), guaranties the solvency of the purchaser and his performance of the contract. Such a factor is called a "del credere agent". He is a mere surety, liable to his principal only in case the purchaser makes default. Agent who is obligated to indemnify his principal in event of loss to principal as result of credit extended by agent to third party. (Source : Black's Law Dictionary -6th Edition) Del credere : Of on pertaining to the obligation to make good a loss arising from failure of a purchaser to pay, undertaken by (a) a sales agent with respect to his or her principal, or (b) any assignor with respect to one who buys or advances cash against the assignor's accounts receivable. Under (b); when the goods are sold or shipped, the accounts may be formally assigned and made payable to a financial institution or a commission house, which immediately advances an agreed portion of their amount, less commission and discount based on the net amount collectible from the customer, the balance of the account is paid to the assignor upon collection of the account. In some instances, the assignee may assume the credit risk and may purchase the accounts outright. Commission houses often add to their function of selling agent those of financing the sales of their principals and of guaranteeing their accounts. (Source : Kohler's Dictionary for Accountants) Del credere agent : An agent who agrees to protect his or her principal against loss resulting from the extension of credit to third parties by the agent on behalf of his or her principal. In the absence of any agreement, an agent has no responsibility to a principal for default on the part of third parties. (Source : Kohler's Dictionary for Accountants)".
Further, he urged that the Commissioner (Appeals) has not at all taken into consideration all the points urged by the appellant and has held that Del Credere Agency is also C&F Agency work.
5. The learned JDR reiterated the points in the OIA.
6. We have gone through the rival contentions. The point at dispute is whether the commission received on account of Del Credere Agency is liable to Service Tax under the category of C&F Agents as defined in Finance Act, 1994. It is very clear that as per the Agreement entered between the appellant and M/s. IPCL, they indemnify M/s. IPCL against the default in payment of creditors. For this purpose, they receive commission at the rate of Rs. 250 per MT. In these cases, they do not even handle the goods. The customers directly book orders and the Principal sends the goods to the customers. In case the customers default in payment, the appellant undertakes the liability and compensates M/s. IPCL. In our view, this service cannot come within the purview of C&F operations. Even though the appellant is a C&F Agent, every activity undertaken by him cannot be brought within the purview of C&F operations. In view of the above observations, we do not find any merit in the OIA. We allow the appeal with consequential relief.